The offer still needs to be executed and operationalised, and it is expected that this transaction will inter alia ensure the transfer of 75 percent of the value of deposits currently under moratorium and the transfer of staff and branches of the existing CBLR operations. Non-moratorium depositors will continue to have full unrestricted access to their funds.

Original: October 11 2017 – On Monday, October 9, the Central Bank of Kenya (CBK) issued a statement about their receipt of a non-binding offer from the SBM Holdings (State Bank of Mauritius – SBM) for parts of Chase Bank.

It came after another meeting last Friday to update Chase Bank depositors about the progress of the expression of interest (EOI) with depositors, and which was then followed by some newsarticles that prompted some alarm over the ‘loss’ of deposits at Chase from the SBM takeover.

The statement mentions SBM’s offer to acquire some assets (i.e. loans) that are matched (i.e. equal) to some liabilities (i.e. customer deposits at Chase) and went ahead to mention that there would be a substantial recovery of deposits and retention of staff and branches of Chase Bank.

The bank, which was expected to be a quick receivership, and concluded in April this year, now has a hole of Kshs 35 billion and the estimate is that SBM will support the recovery of 75% of the deposits as at when Chase Bank was closed in April 2016. One third of the funds will be available on January 1, another third will be available in a savings account that will earn interest (it was a sore point for depositors to hear that their funds in the bank that was known for great rates had not been earning interest since it was closed in April 2016), and a third will be available in installments over the next three years.

The final amount will be recovered by suits and fraud cases against the defaulters who may include directors and managers (insiders) at the bank.

While CBK had earlier reported that 12 banks had replied to the EOI (three Kenyan banks, four foreign banks, and five financial consortiums), the standard quotes the CBK Governor, Dr. Patrick Njoroge, as saying “All the investors in the end indicated that they were not interested in taking up the bank, save for one who was only interested in carving out some assets and liabilities and not an entire acquisition.”

SBM has a substantial Government of Mauritius shareholding, and this will be the second bank that SBM is buying in Kenya, after they took over Fidelity Bank and one story is that their rescue of Fidelity was tied to some assurance that they would also get Chase, ahead of other bidders.

SBM will do due diligence on what branches and staff it wants to retain going forward. The Chase recovery seems similar to one that Imperial Bank shareholders had initially proposed when they found a hole at their bank – one of staggered access to funding, immediate, then some spaced over three years.

Yesterday the Central Bank of Kenya (CBK) invited new investors to express interest in buying into Chase Bank as they also extended the management period of the bank by another six months. When the CBK governor met depositors last November, he indicated that he hoped that the deal would be concluded by the first anniversary of the closing of Chase Bank (April 7), but that has now been pushed back. Last week, the Governor also said that nine banks were interested in opening shop in Kenya.

Following the receipt and evaluation of EOIs, a shortlist of qualifying investors (“Shortlisted Investors”) will be granted access to a haseomprehensive confidential data room to develop a formal proposal to acquire Chase Bank (Kenya) Limited.The Shortlisted Investors will be determined in a fair process using appropriate and objective criteria based on, inter alia, regulatory imperatives and prudential guidelines which will ensure a speedy and optimal recovery for depositors, creditors and other stakeholders of Chase Bank (Kenya) Limited, whilst also mindful of seeking to preserve and develop a sound and innovative banking system in Kenya.

The deadline for applications is April 21, and CBK has appointed KPMG as its advisors in this process. EOIs should include the following key areas: Interest in banking in Kenya, ownership details, management skills, adequate capital, financial resources, liquidity availability and the proposed transaction structure.

No information beyond what is already available in the public domain will be made available to interested parties and there will be no question and answer process at this stage.

Following the receipt of EOIs, shortlisted Investors will also be granted access to a “Data Room ” to develop their investor proposals (from May 3)

May 2 update (PDF) from the Central Bank of Kenya: 12 replies to the EOI were received. The respondents comprised of three Kenyan banks, four foreign banks, and five other financial institutions and consortia. The shortlisted ones will now be given access to confidential data and are to return their proposals by June 9.